The Principal Commissioner Of Income Tax-1 v. Arvind Limited

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 289 of 2022 ================================================================ THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 VersusARVIND LIMITED ================================================================Appearance:MR KARAN SANGHANI FOR M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ================================================================ CORAM:HONOURABLE MR. JUSTICE A.J.DESAIandHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 20/06/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) Heard learned advocate Mr.Karan Sanghani forM.R. Bhatt & Co. for the appellant. 2.By this Tax Appeal under Section 260A of theIncome Tax Act, 1961 (for short “the Act, 1961”),the appellant Revenue has challenged the orderdated 30[th] September, 2021 passed by the IncomeTax Appellate Tribunal, Ahmedabad Bench ‘B’ (forshort “the Tribunal”) in ITA No.249/Ahd/2016 forthe Assessment Year A.Y. 2010-11. The substantialquestion of law proposed in this Tax Appeal is asunder : “Whether on facts and circumstances of the caseand in law, the Appellate Tribunal was justifiedin deleting the disallowance of Rs.6,51,16,385/- C/TAXAP/289/2022 ORDER DATED: 20/06/2022 made on account of excise duty adjusted againstsecurities premium account contrary to theprovisions of Section 43B of the Act, whichallow deduction of any tax, duty cess or feeonly when such sum is actually paid by theassessee?” 3.During the assessment proceedings, the exciseduty which was adjusted against securitiespremium account amounting to Rs.3,67,71,030/- andRs.2,83,45,355/- was sought to be disallowedunder Section 43B of the Act, 1961. On query, theassessee explained that such claim was notcharged to the Profit & Loss account and it hasbeen set off against the share premium account asper the claim of capital reduction sanctioned bythe High Court of Gujarat vide order dated 15[th]February, 2013 and that being an item of Section43B of the Act, 1961 has been claimed on paymentbasis. 4.However, the Assessing Officer was of theview that the assessee got credit of CENVATcredit but, actually, it has not made any paymentduring the year and therefore, the claim made bythe assessee under Section 43B of the Act, 1961was to be disallowed. 5.TheAssessingOfficerrejectedtheexplanation and reply of the assessee statingthat the assessee reversed the CENVAT credit onthe order of excise department and the same wasnot certified by the auditor in the audit report in Form 3CD, and therefore, the assessee cannotbe said to have paid the excise duty actually anddisallowed the claim of the excise duty underSection 43B of the Act, 1961 which was adjustedagainst the securities premium account amountingto Rs.6,51,16,385/-. 6.Being aggrieved, the assessee preferredappeal before the CIT(Appeals), who allowed theappeal of the assessee. 7.The Revenue preferred an appeal before theAppellate Tribunal. The Appellate Tribunal,however, dismissed the appeal filed by theRevenue, holding as under : “13. Heard both the sides and perused thematerial on record. The assessee has been usingNaptha as fuel gas turbine for the generation ofelectricity. A part of the electricity sogenerated was for captive consumption for themanufacture of final product and part of theelectricity so generated was sold out to one ofsister concerns of the assessee. The CENVATcredit of fuel used for the generation ofelectricity is admissible for electricity usedwithin the factory for production i.e. inputused for generation of electricity clearedoutside the factory is not entitled for CENVATcredit. Therefore, the assessee has reversedCENVAT credit of duty availed on input Naptha “13. Heard both the sides and perused thematerial on record. The assessee has been usingNaptha as fuel gas turbine for the generation ofelectricity. A part of the electricity sogenerated was for captive consumption for themanufacture of final product and part of theelectricity so generated was sold out to one ofsister concerns of the assessee. The CENVATcredit of fuel used for the generation ofelectricity is admissible for electricity usedwithin the factory for production i.e. inputused for generation of electricity clearedoutside the factory is not entitled for CENVATcredit. Therefore, the assessee has reversedCENVAT credit of duty availed on input Naptha attributable to the electricity passed on toother entities. However, from March, 2004 theassessee stopped reversing credit of CENVATwhich was earlier reversed by it for certainperiod. The matter was in dispute and it haspeen held by the excise authority that theCENVAT attributable to input used for generationof electricity which was sold to other entitieswas required to be reversed. There would be noCENVAT credit on input (Napth) used forgenerating electricity sold to other entities.The Assessing Officer was of the view thatassessee has not made any payment of excise dutythrough cheque or utilizing P & L Accounttherefore the assessee was not entitled to claimof excise duty expenditure during the year underconsideration. The issue has been discussed indetail in the finding of ld. CIT(A) aselaborated in this order, that assessee wasrequired to pay excise duty of Rs.6,51,16,385/on the ground that in earlierassessment year it had wrongly taken CENVATcredit pertaining to input used for generationof electricity which was sold to outsideparties. The same was settled by utilizingCENVATcreditduringtheyearunderconsideration. The assessee has followedexclusive method of accounting as purchases andsales in the P & L A/c are reflected at net ofexcise duties. The CENVAT credit receivable isshown in the Balance Sheet under the head loan and advances. Since the excise authority heldthat CENVAT credit on fuel used for generationof electricity supplied to the outside entitiesis not available therefore the assessee hasadjusted CENVAT credit receivable against CENVATpayable/excise duty. The assessee has exercisedhis option to set off CENVET credit againstexcise liability, which amounts to payment ofexcise duty, therefore, assessee is entitled todeduction u/s. 43B of the Act. As referred inpara 12 of this order, the facts in the case ofthe issue are distinguishable from the facts ofthe case law cited by the Ld. DR in the case ofCIT vs. Maruti Vdygo Ltd. 86 taxman as in thatcase the assessee has claimed advance Payment ofexcise duty as deduction under section 43Bwhereas in the case of the assessee aselaborated above the assessee has used theCENVAT credit balance for making payment ofexcise duty. The records of CENVAT credit ismaintained in RG 23 register as per excise lawand adjustment of CENVAT credit is one of themode of payment of excise duty under ExciseRule. Considering the above facts and findings,we do not find any infirmity in the decision ofld. CIT(A). Accordingly, this ground of appealof revenue is dismissed.” 8.In view of the concurrent findings arrived atby the CIT (Appeals) and the Tribunal, we are ofthe opinion that there is no legal infirmity in 8.In view of the concurrent findings arrived atby the CIT (Appeals) and the Tribunal, we are ofthe opinion that there is no legal infirmity in the impugned orders of the Tribunal as theTribunal has come to the finding of factconsidering the elaborate discussion made by theCIT in its order holding that the assessee wasrequired to pay the excise duty ofRs.6,51,16,385/- on the ground that in earlierassessment year it had wrongly taken CENVATcredit pertaining to input used for generation ofelectricity which was sold to outside parties andthe same was settled by utilizing CENVAT creditduring the year under consideration by followingexclusive method of accounting as purchases andsales in the P & L Account are reflected at netof excise duties. The Tribunal has found that theCENVAT credit receivable is shown in the BalanceSheet under the head loans and advances as theexcise authority held that CENVAT credit on fuelused for generation of electricity supplied tothe outside entities is not available, theassessee adjusted the CENVAT credit receivableagainst the CENVAT credit payable/excise duty byexercising option to set off CENVAT creditagainst excise liability, which amounts topayment of excise duty, and therefore, theassessee is rightly entitled to deduction underSection 43B of the Act, 1961, which provides thatunless the taxes or duties are paid actuallybefore the due date of return, the same would notbe available as deduction. The Tribunal,therefore, relying upon the record of CENVATcredit in RG 23 registered as per the excise law and adjustment of CENVAT credit, which is onemode of payment of excise duty under Excise Rule,has rightly held that there was payment of exciseduty and therefore, the assessee was entitled todeduction under Section 43B of the Act, 1961. 9.In view of above finding of facts arrived atby the CIT (Appeals) as well as the Tribunal,there is no legal infirmity in the impugned orderand therefore, no question of law, much less anysubstantial question of law, proposed otherwise,arises from the impugned order. The present TaxAppeal accordingly stands dismissed. (A.J.DESAI, J) (BHARGAV D. KARIA, J) Dolly